UK inflation remained unchanged and below pay growth, after many analysts had expected a slight rise.
The consumer prices index (CPI) stayed at 4% in January 2024, still double the Bank of England target rate of 2%.
Core inflation, which excludes the price of energy, food, alcohol and tobacco, remained at 5.1% in January, according to the latest data from the Office for National Statistics (ONS).
Inflation and pay data
Signs that pay awards are falling in January
CPIH, the measure of inflation that includes owner-occupiers’ housing costs, stood at 4.2% over the year to January 2024, the same rate as December.
The retail prices index (RPI), the rate often used by trade unions in pay negotiations, fell to 4.9% in the 12 months to January 2024, down from 5.2% the month before.
The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services – principally higher gas and electricity charges – while the biggest downward contributions came from furniture and household goods, food and non-alcoholic beverages.
Yesterday’s data from the ONS labour market figures showed that annual increase in regular weekly earnings without bonuses was 6.2% in October to December 2023. When adjusted for inflation using the CPIH measure, regular pay rose by 1.8%. Taking bonuses into account, annual earnings increased by 5.8% – or 1.4% when adjusted for inflation.
Ben Harrison, director of the Work Foundation at Lancaster University, said: “The UK has hit a second minor set-back this year as inflation is stuck at 4%, which is unchanged from the previous month, due to higher gas and electricity charges. This will present a quandary to Bank of England rate-setters about whether to stick or reduce interest rates as inflation remains double their target.
“And it presents big challenges for workers. Real-term pay may have risen this month by 1.4%, but ONS data shows that four in ten adults who pay energy bills are finding it very or somewhat difficult to afford them, and the OBR predicts living standards will be 3.5% lower in 2024-25 than before the pandemic.
“Those in low-paid and insecure jobs will be worst impacted by this and among those most vulnerable should inflation remain stuck or if interest rates rise further. This underlines the importance of more action to improve access to better paid, more secure jobs.”
TUC general secretary Paul Nowak said: “The cost-of-living crisis is still hammering households in every corner of the country. Prices are still going up with inflation at double the Bank of England’s target. And whether it’s covering the weekly shop or paying the bills, working people remain under the cosh.”
Grant Fitzner, ONS chief economist, described today’s figures as a “mixed bag”, highlighting the 0.4% monthly drop in food prices, the first time they have fallen since September 2021.
“Food prices have seen their first monthly fall for over two years, so that’s a good sign,” he told the BBC.
Lalitha Try, an economist at the Resolution Foundation, said: “No news is good news along the bumpy road back to 2%, with inflation flatlining at 4% in January, confounding expectations of a rise.
“Instead, rising energy costs in January were offset by falling furniture and food costs – with food prices falling for the first time since September 2021. This is welcome news for low-income households who spend a higher proportion of their income on food.”
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Compensation and benefits opportunities on Personnel Today
Browse more compensation and benefits jobs
